It’s no secret that venture capitalists have left the Internet space to fend for itself.
To some people, this means evolution is over. How can you start a company without venture capitalists?
Well, believe it or not, lots of people started companies before there was venture capital. In fact, the role of venture capital in building industries is pretty limited.
A venture capitalist is interested only in outfits that will bring a tenfold return in a very short time. He or she knows that nine of the best-laid plans will fail, but the one winner will make up for it.
Back in Houston, where I started my career as a business reporter, we called such investment “wildcatting.” It was the romantic side of the oil patch, but it didn’t represent a large piece of the business. Most work involved a heavy dose of research and exploitation of existing fields. The gambling days had ended decades before.
As the folkways of our industry become known, the same thing will happen.
Those companies that succeed in turning a profit will eventually invest it in expanding their niches. They will know what things cost and avoid frills. They will exploit existing fields and test the ground thoroughly to prevent dry holes.
But there will always be room for new entrepreneurs. There are no venture funds for restaurants, but chefs still manage to find angel investors to back their food. There are no venture funds for small groceries, but many immigrants belong to investment clubs that pool money for just such opportunities. My dad got his capital from his dad, and there’s no shame in its coming from the in-laws either, assuming you make a go of it.
Then there’s plain, old sweat equity. That’s what I used. Eighteen years ago this month, I spent $16 on some business cards that read “Have Modem, Will Travel” and went out looking for freelance work. I’ve raised my family on it.
The Internet should be a great place for sweat equity. No one knows you’re a dog, and no one knows you lack funding, either. The main cost of building a site remains the time spent researching and designing it. Hosting is still cheap, and Moore’s Law says it will stay cheap.
It’s true that building a big site means raising some cash, but there are lots of sources for it who don’t insist that you bring them tenfold returns in two years. Let the boys and girls on Sand Hill Road play with geneticists or fuel cell companies. You don’t need them.
There’s even opportunity here. If you can become an intermediary between those who are looking for angel investments, or those moms and pops who need an analysis of junior’s business plan, I’ll bet you can make yourself a tidy living. Acting as a business broker between small dot-coms and larger companies seeking to purchase profitable enterprises is another opportunity.
Send me your war stories, your ideas, and your proposals. Let’s talk about them. Instead of crying over the past, let’s build the future.
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